Speed, distance, and electronic trading: New evidence on why location matters

Journal of Financial Markets

Volumn 13, Issue 4, 2010, Pages 367-396

  Garvey, Ryan ^a   Wu, Fei ^b  

^a DUQUESNE UNIVERSITY   (United States)

^b JIANGXI UNIVERSITY OF FINANCE AND ECONOMICS   (China)

Author keywords

Data center; Execution costs; Execution speed; Location; Trading

Indexed keywords

EID: 77955430080     PISSN: 13864181     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.finmar.2010.07.001     Document Type: Article

References (36)

1. Barclay M.J., Hendershott T., McCormick T. Competition among trading venues: information and trading on electronic communication networks. Journal of Finance 2003, 58:2637-2665.
2. Battalio R., Hatch B., Jennings R. All else equal? A multidimensional analysis of retail, market order execution quality. Journal of Financial Markets 2003, 6:143-162.
3. Biais B., Hillion P., Spatt C. An empirical analysis of the limit order book and the order flow in the Paris Bourse. Journal of Finance 1995, 50:1655-1689.
4. Boehmer E. Dimensions of execution quality. Journal of Financial Economics 2005, 78:553-582.
5. Boehmer E., Jennings R., Wei L. Public disclosure and private decisions: equity market execution quality and order routing. Review of Financial Studies 2007, 20:315-358.
6. Christoffersen S., Sarkissian S. City size and fund performance. Journal of Financial Economics 2009, 92:252-275.
7. Copeland T., Galai D. Information effects on the bid-ask spread. Journal of Finance 1983, 38:1457-1469.
8. Coval J.D., Moskowitz T.J. Home bias at home: local equity preference in domestic portfolios. Journal of Finance 1999, 54:2045-2073.
9. Coval J.D., Moskowitz T.J. The geography of investment. Journal of Political Economy 2001, 109:811-841.
10. Crosman, P., 2008. How the NYSE achieves low latency. Wall Street and Technology, May 13. Online at:. http://www.wallstreetandtech.com.
11. Easley, D., Hendershott, T., Ramadorai, T., 2008. The price of latency. Working Paper, Cornell University.
12. Foucault T., Roell A., Sandas P. Market making with costly monitoring: an analysis of the soes controversy. Review of Financial Studies 2003, 16:345-384.
13. Garvey R., Wu F. Intraday time and order execution quality dimensions. Journal of Financial Markets 2009, 12:203-228.
14. Glosten L.R. Is the electronic open limit order book inevitable. Journal of Finance 1994, 49:1127-1161.
15. Glosten L., Milgrom P. Bid, ask and transaction prices in a specialist market with heterogeneously informed traders. Journal of Financial Economics 1985, 14:71-100.
16. Goldberg, D., Luperico, A., 2004. Cruising at 30,000, semi-pro numbers level off, but trading volumes rise. Bear Stearns Company Report, August.
17. Goldstein M.A., Shkilko A.V., Van Ness B.F., Van Ness R.A. Competition in the market for NASDAQ securities. Journal of Financial Markets 2008, 11:113-143.
18. Government Accountability Office (GAO), 2005. Decimal pricing has contributed to lower trading costs and a more challenging trading environment. GAO Report. Online at:. http://www.gao.gov/new.items/d05535.pdf.
19. Grinblatt M., Keloharju M. How distance, language and culture influence stockholdings and trades. Journal of Finance 2001, 56:1053-1073.
20. Harris L., Hasbrouck J. Market vs. limit orders: the superdot evidence on order submission strategy. Journal of Financial and Quantitative Analysis 1996, 31:213-232.
21. Hau H. Location matters: an examination of trading profits. Journal of Finance 2001, 56:1959-1983.
22. Hendershott, T., Moulton, P.C., 2009. Speed and stock market quality. Working Paper, University of California, Berkeley.
23. Huang R. The quality of ECN and NASDAQ market maker quotes. Journal of Finance 2002, 57:1285-1319.
24. Huberman G. Familiarity breeds investment. Review of Financial Studies 2001, 14:659-680.
25. Ivkovich Z., Weisbenner S. Local does as local is: information content of the geography of individual investors' common stock investments. Journal of Finance 2005, 60:267-306.
26. Liu W. Monitoring and limit order submission risks. Journal of Financial Markets 2009, 12:107-141.
27. Lo A.W., MacKinlay C., Zhang J. Econometric models of limit-order executions. Journal of Financial Economics 2002, 65:31-71.
28. Lucchetti, A., 2006. Firms seek edge through speed as computer trading expands. Wall Street Journal, December 15, A1.
29. Macey J.R., O'Hara M. The law and economics of best execution. Journal of Financial Intermediation 1997, 6:188-223.
30. Martin, R., 2007. Wall Street's quest to process data at the speed of light. Business Innovation. Online at:. http://businessinnovation.cmp.com.
31. Petersen M. Estimating standard errors in finance panel data sets: comparing approaches. Review of Financial Studies 2008, 22:435-480.
32. Peterson M., Sirri E. Order preferencing and market quality on U.S. equity exchanges. Review of Financial Studies 2003, 16:385-415.
33. Rock, K., 1996. The specialist's order book and price anomalies. Working Paper, Harvard University.
34. Rogow, G., 2009. Schapiro: SEC reviewing various market structure issues. The Wall Street Journal, September 14, C1.
35. Stallings W. Data and Computer Communications 2004, Pearson Prentice-Hall, Upper Saddle River, NJ. 7th ed.
36. Zhu, N., 2002. The local bias of individual investors. Working Paper, Yale ICF No. 02-30.